Latest MBA Project: Helping Cash-Strapped States

MBA students pursuing social enterprise work have turned their attention to the next up-and-coming charity case in need of their help: state governments and the agencies they operate.

States saw an average revenue decline of 30 percent in fiscal 2009, and some may face their toughest year yet in 2012 after one-time budget-balancing measures, such as asset sales and fund transfers, have been used up, says Brookings Institution Fellow Tracy Gordon.

For MBA candidates, all that budget pain has created an opportunity to test their mettle against some of the nation's thorniest public-sector problems. UCLA's Anderson School of Management (Anderson Full-Time MBA Profile) sent a team of students to the Los Angeles Unified School District last year to help it implement a new budgeting process. The state of California cut the budget of the nation's second-largest school system to $5 billion in 2010, from $6.5 billion in 2008, leading the district to lay off teachers and shorten the school year by five days. One of the students' suggestions, which the district adopted, was to phase in the budget process over three years instead of two, as the district had originally planned.

The city of Detroit, where revenue has fallen 20 percent since fiscal 2007, according to Bloomberg data, last year met with two teams of MBA candidates from the University of Michigan's Ross School of Business (Ross Full-Time MBA Profile). One team looked at how the city could maximize income tax collection, the other at how to prevent revenue losses in the city's transit system.

Interest in Government

The increasing use of MBA students in the public sector dovetails with a movement toward social enterprise work on business school campuses.

Of six career fields, government work attracted the greatest amount of new interest among MBA candidates following the financial crisis, according to a 2008 survey conducted by the student organization Net Impact. Of 1,850 survey respondents, 29 percent said they were more interested in public-sector work than they were before the crisis, beating out entrepreneurship and management consulting.

Net Impact started in 1993, encouraging its members to pursue careers in environmental sustainability, corporate responsibility, and other areas that advanced social causes. The group now counts 177 graduate chapters across the country, up from 119 in 2007. Membership has more than doubled since 2006, and the group provides a stream of MBA talent to such agencies as the U.S. National Parks Service and the Chicago Public Schools system.

Next year, the group expects to start a marketing campaign that will raise awareness of public-sector MBA jobs, says Liz Maw, Net Impact's national executive director.

Pool of Talent

With the average MBA student coming to business school with four years of work experience—10 years for part-time students—a cache of highly motivated talent is available on B-school campuses that the public sector can draw from at minimal cost, says George Abe, faculty director of applied management research at UCLA's Anderson. "Business schools have a contribution to make," he notes.

And many MBA students are eager to make it. Government-student projects have long been the domain of public policy schools. But as challenges turn financial, more MBA students are creeping into the mix.

Anderson requires students to complete an on-the-ground consulting project. In the past, the vast majority were for local or national companies. But Abe says about 20 percent to 30 percent of the school's projects each year are now completed as social ventures, including work at nonprofits and microfinance startups. He added three public-sector projects to that group in 2010.

At Ross, the Detroit projects also were among the first of their kind, says Ross professor and project coordinator Paul Clyde.

"Impact Investing"

Students are applying their previous work experience to the public sector in a variety of ways.

At the University of Chicago's Booth School of Business (Booth Full-Time MBA Profile), students interested in finance and private equity have studied "impact investing," says Linda Darragh, director of entrepreneurship programs at Booth. The term describes an investment strategy that places capital in ventures with social or environmental goals, she says.

This year the U.S. State Dept. requested a joint report from Darragh's students and those at Northwestern's Kellogg School of Management (Kellogg Full-Time MBA Profile) that will outline how the federal government might support impact investing in the private sector. The schools expect to submit the report in June.

Using Students in Los Angeles

For the L.A. schools project, the district approached UCLA, because the district was considering switching to a budgeting model that would give individual schools more spending autonomy, allowing each of them to make unique budget decisions independent from the state, says Matt Hill, an administrative officer in the district's Office of the Superintendent.

The UCLA students helped identify the potential plan's structure. The district took their work and then approached UC-Berkeley's Haas School of Business (Haas Full-Time MBA Profile) this year, asking students there to devise an implementation and marketing plan for the budget process.

"These are very real projects. Students don't have all the information they need, it's very ambiguous," says Beth Walker, associate dean of MBA programs at Arizona State University's W.P. Carey School of Business (Carey Full-Time MBA Profile), where students have done similar work.

Influencing Corporate Culture

Dealing with public-sector complexities is viewed highly by corporate employers, says Net Impact's Maw. That has helped new public-sector projects attract students determined to enter the private sector, she added. Such work tends to have the ancillary effect of making students advocates for those social causes within the companies that eventually hire them.

At W.P. Carey, for example, students spent five weeks identifying new revenue streams for Arizona Industries for the Blind, a state agency that provides employment for the visually impaired. At the end of the class, students said the experience made them more likely to support hiring programs for disabled candidates in their workplaces, Walker says.

The L.A. school district's Hill says such projects are most effective when public-sector agencies clearly define what the work will entail and choose programs that have adequate funding resources.

Bob Buckler, who recruited the Michigan students for the Detroit projects when he was chief operating officer of the city, said he came away from the experience believing that several potential MBA projects have yet to be identified in the public sector.

"You can look at any kind of operation a city has, from its transportation system, to waste management, to street lights, to water departments. All these operations have major improvement opportunities," he says.

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